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Wednesday, 15 February 2017
Page: 965

Senator GALLACHER (South Australia) (13:27): I rise in senators' statements to make a contribution about the work of the Public Works Committee, the longest standing committee of the parliament. It looks at the purpose of proposed work, the suitability of that work, the need for and advisability of the work, and the cost- effectiveness of the proposal, whether it is revenue producing and its current prospective value. I have been a member of the Public Works Committee since about July 2011. We do lots of work. Lots of appropriations pass through that committee. From time to time you take note of the Australian National Audit Office reports, because the ANAO forensically audit the expenditure of this money.

One particular department comes to mind, and that is the Department of Immigration and Border Protection. They have an unenviable record. I will quote from two Australian National Audit Office reports. The report of 13 September 2016 states:

Of most concern is the department’s management of processes for contract consolidation and the open tender. The Australian Government intended that these procurement processes would rein in the growing expense associated with managing the centres. In both cases, the approach adopted by the department did not facilitate such an outcome.

The report of 16 January 2017 states:

The Department of Immigration and Border Protection’s management of the garrison support and welfare services contracts at the offshore processing centres in Nauru and Papua New Guinea (Manus Island) has fallen well short of effective contract management practice.

…   …   …

The audit recommendations are intended to address the significant weaknesses observed in DIBP’s contract management practices.

So it was extremely interesting to see a procurement from this department come before the Public Works Committee.

I want to say right at the outset, there is no criticism of the wonderful people in that department. They serve Australia well and they do a stunning job. A very successful job is done by all of those workers. Where the department has fallen well short is in its demonstrated capacity to appropriately and prudently manage government expenditure.

They came to a sectional committee of the Public Works Committee last Friday with a proposal to spend $256 million—that is right, $256 million—fitting out some premises; not buying some premises, not leasing some premises, but fitting them out for $256 million. They came to that committee with a horde of staff. There were probably 25 support staff. The challenge they had was that they could not answer our questions. Our questions were simple and clear. You have to demonstrate cost effectiveness. Last time I looked, 85,000 square metres into $256 million came out to about $3,000 per square metre. It is obviously at the very high end of a fit-out. Our parameters have been $1,200 to $1,800 per square metre. They were way over that. They were right up at the top. But they said:

Don't worry. There is a lease incentive in there. The landlord is going to give us $212 million—$212 million of that $256 million is a lease incentive.

We said:

Gee, that sounds good. We must be paying a couple of dollars over the longer haul on the lease payments.

But they are not disclosed. When we probed them on the lease payment, we found out that only half of the $212 million is actually a lease incentive in reduced outgoings. The other half is a loan. It is capital advanced up-front by the landlord and then amortised over the period of the lease. We said we had some clear concerns—and I say 'we' in the collegiate sense; this is a bipartisan committee with members of the House of Representatives. Senator Smith, Mr Coleman and myself were the sectional committee.

As always in these circumstances, I went back to the manual. The manual says this:

Whole-of-life and cost-benefit analysis

Because lease incentives used to finance projects can lead to hidden ongoing costs to proponent entities, fit-out projects utilising lease incentives should provide an analysis of the benefits gained by financing the works through lease incentives, rather than full financing of the works by the proponent entity.

So we have two departments here now. We have the Department of Immigration and Border Protection, run by the Hon. Peter Dutton, who has a horrendous track record—ably demonstrated buy the Australian National Audit Office—of not submitting to government and public works scrutiny and not passing expediency motions in the House of Representatives to cover the urgency of his works. It was demonstrated by the Australian National Audit Office. And we have the Hon. Mathias Cormann, the finance minister, who signed off on this on 3 February 2016, not giving his own committee, the Public Works Committee—it is a government-controlled committee; it is chaired by the government—the information to allow us to properly test the probity of this arrangement. I have to tell you this, it is the biggest single fit-out the Public Works Committee has looked at in six years, and I have been on the committee for that whole six years. We are probably going to find out it is the biggest single fit-out of all time.

But that is not the issue. If we are spending $250 million fitting out premises, what are we paying on the lease? If there is a $200 million incentive, where is that coming from? Where is the probity and the disclosure? I will give you an example: 1 Canberra Avenue was the last such proposal that came to the Public Works Committee. It was for $32 million worth of fit-out for 1,400 people. The Department of Finance gave the committee a figure of $195 million as the lease figure for 1 Canberra Avenue. On AusTender three months later, it came out that it was $376 million for the lease; the reason is that they give you net present value. The average elector in the street would have no idea what 'net present value' means, and I would say there are a few in this parliament who would struggle with 'net present value' as well.

So this project is enormous. It is probably the single biggest offering of lettable area—85,000 square metres—in recent memory in Canberra. As a committee, we are asked to just tick off $250 million-odd worth of expenditure because there is a lease incentive from a landlord. Well, I have to tell you, I do not think we are going to do that. To put it into perspective, we all drive past 1 Canberra Avenue all the time. There are 1,400 people there and it cost $32 million to fit out. This involves 6,000 people, four premises and $250 million worth of expenditure. The committee is being asked by the finance minister and the Hon. Peter Dutton to tick off on it as if there are no issues and no problems. As I say, that is unlikely to happen from my perspective. I do not speak for anyone else on the committee, but I will put my arguments very clearly that we need full transparency and full disclosure. We need to know what the square metreage is that you are paying at those 85,000 square metres, where this lease incentive is coming from and why you are taking capital from a developer and amortising it back over the lease. We want to see the whole-of-government cost of this project and the economics of moving from a larger footprint to a smaller footprint, and it should all be abundantly clear and disclosed transparently, both to the committee and to the taxpayer.

I accept there may be commercial-in-confidence figures around the place that would affect negotiations, and they are appropriately dealt with in camera. I actually know a few figures, which I will not disclose here. Suffice to say this, if we are paying $256 million or $257 million for a fit-out and the landlord is very generously advancing $200 million plus of his own money, where is the rest of the deal? Why isn't it transparent?

The Hon. Mathias Cormann lectures this side of the chamber about fiscal responsibility and prudent spending of government money. When he was in opposition he claimed that he was an advocate of transparency, that everything should be fully disclosed in sunlight so we can see what is going on. Well, I would like to get the answers to this. I would like those two ministers to put on the record the answer to what the hell they are doing.